Wisconsin Governor at Center of a Vast Fund-Raising Case

Gov. Scott Walker of Wisconsin is seeking a second term in November, and newly released documents could hurt him.

Spencer Platt / Getty Images

By MONICA DAVEY and NICHOLAS CONFESSORE

June 19, 2014

CHICAGO — Prosecutors in Wisconsin assert that Gov. Scott Walker was part of an elaborate effort to illegally coordinate fund-raising and spending between his campaign and conservative groups during efforts to recall him and several state senators two years ago, according to court filings unsealed Thursday.

The allegations by five county district attorneys, released as part of a federal lawsuit over the investigation into Mr. Walker, suggest that some of the governor’s top campaign aides directed the political spending of the outside groups, most of them nonprofits, and in effect controlled some of them.

The documents made public on Thursday threatened to cloud the political prospects of Mr. Walker, who is seeking election to a second term this fall and is mentioned as a possible Republican presidential candidate in 2016. They provided a rare view of the inner workings of a far-flung network of conservative nonprofit groups that have come to play a decisive role in national and state elections, secretly moving hundreds of millions of dollars into campaigns by avoiding traditional political action committees, which typically face tougher disclosure requirements.

Prosecutors say Mr. Walker and his aides violated Wisconsin donation limits and disclosure rules by supervising a blitz of political spending by other organizations that could accept unlimited secret donations, including money from corporations.

Some of the groups, in Wisconsin and elsewhere, appear to serve as little more than conduits to funnel money from donors around the country to an array of allied organizations with ties to specific constituencies, such as gun owners or abortion opponents. Prosecutors say that the groups in Wisconsin worked closely with Mr. Walker’s allies both in the state and in Washington, and that Mr. Walker’s campaign consultants advised him on political strategy and television advertising while also raising money and directing the activities of an array of at least a dozen outside groups.

“That coordination included a nationwide effort to raise undisclosed funds for an organization which then funded the activities of other organizations supporting or opposing candidates subject to recall,” the prosecutors wrote.

While the newly released documents describe “a wide-ranging scheme to coordinate activities of several organizations with various candidate committees to thwart attempts to recall Wisconsin Senate and gubernatorial candidates,” no criminal charges have been brought, and the case has stirred an intense legal debate over what exactly constitutes illegal coordination in such cases.

Lawyers for one of the groups, the Wisconsin Club for Growth, have rejected arguments that the fund-raising violated campaign finance laws. They have argued in part that because they ran only “issue ads” — advertisements that attack candidates’ stances but do not urge listeners to vote for or against anyone — the spending was not covered by coordination restrictions.

The Internal Revenue Service is formulating new rules that would clarify and restrict how much money tax-exempt organizations can spend trying to elect or defeat candidates, an effort that is under intense criticism from political advocacy organizations, chiefly on the right.

This year, Gregory A. Peterson, a judge overseeing the investigation, quashed subpoenas, saying he had found no probable cause of campaign finance violations.

And in May, a federal judge, Rudolph T. Randa, granted a preliminary injunction to halt the criminal inquiry, known in Wisconsin as a John Doe investigation, which is usually secret. The documents were unsealed as part of an appeal to that ruling, which is before the Court of Appeals for the Seventh Circuit, in Chicago.

“These documents show how the John Doe prosecutors adopted a blatantly unconstitutional interpretation of Wisconsin law that they used to launch a secret criminal investigation targeting conservatives throughout Wisconsin,” said Andrew M. Grossman, a lawyer for the Wisconsin Club for Growth.

In a statement, Mr. Walker said: “The accusation of any wrongdoing, written in the complaint by the office of a partisan Democrat district attorney, by me or by my campaign is categorically false. In fact, two judges, in both state and federal courts, have ruled that no laws were broken.” He added, “This is nothing more than a partisan investigation with no basis in state law.”

One legal filing by the prosecutors describes an email Mr. Walker sent to Karl Rove, the Republican strategist, extolling the importance of R. J. Johnson, a campaign consultant, in leading the coordination efforts. Mr. Walker wrote: “Bottom-line: R. J. helps keep in place a team that is wildly successful in Wisconsin. We are running 9 recall elections and it will be like running 9 Congressional markets in every market in the state.”

Prosecutors contend that Mr. Walker’s email and other evidence collected in the investigation show that the governor, his campaign and the outside groups intended the issue ads to influence the state elections. They also argue that Mr. Johnson’s consulting work on behalf of other organizations supporting Mr. Walker, along with joint fund-raising efforts and close coordination of spending between the Walker campaign and outside groups, effectively made those organizations extensions of Mr. Walker’s campaign.

If so, some of the money going to the outside groups would have amounted to illegal contributions to Mr. Walker because they exceeded Wisconsin’s contribution limits, came from prohibited sources such as corporations or were not disclosed.

In a motion filed last December and unsealed on Thursday, prosecutors said the Wisconsin Club for Growth was, for all intents and purposes, controlled by Mr. Johnson, who is alleged in an affidavit to have said, “We own C.F.G.”

At the time, Mr. Johnson and his business partner were consultants to Mr. Walker’s campaign. Mr. Walker and several of his aides, including a professional fund-raiser and his deputy chief of staff, raised money for both the campaign and the Club for Growth chapter, prosecutors say, money that was then spent at the direction of Mr. Johnson to help Mr. Walker and several Republican state senators facing recall elections.

Under Mr. Johnson, the Club for Growth become “a hub,” according to prosecutors, for coordinating political spending by the Walker campaign and an array of outside groups. These ranged from the Republican Governors Association to Americans for Prosperity, the conservative advocacy group co-founded by the billionaire industrialist David H. Koch and financed by the political network overseen by Mr. Koch and his brother Charles.

In one instance, prosecutors say the Club for Growth transferred at least $2.5 million to the state’s leading business trade organization, Wisconsin Manufacturers and Commerce, which in turn ran advertisements supporting Mr. Walker. During the same period, an official at the trade group joined conference calls with Mr. Walker and others regarding election strategy.

Mr. Johnson also formed an apparent shell organization, Citizens for a Strong America, and used it to move $4.6 million between the Club for Growth and other allies of Mr. Walker, including Wisconsin Family Action, Wisconsin Right to Life and the United Sportsmen of Wisconsin. All three groups helped coordinate absentee ballot drives during the State Senate recall elections in Wisconsin in 2011.

In 2012, prosecutors say, Mr. Johnson also persuaded a national “super PAC” known as Ending Spending to run ads in support of Mr. Walker.

For months, an increasingly public battle has been brewing over the investigation into Mr. Walker, his campaign and the outside groups. While most John Doe investigations are largely secret, details of this one have trickled out in court filings, and the new documents offer the clearest picture yet of what prosecutors were pursuing.

In an earlier John Doe investigation into whether campaign work was being done on county time in the office Mr. Walker had led as the Milwaukee County executive, three of Mr. Walker’s former aides and several other associates were convicted of crimes.

Mr. Walker, who was elected in 2010 in a national wave that flipped control of Wisconsin’s Capitol to Republicans, drew attention only weeks after he took office by moving to limit collective bargaining rights for most public-sector employees. In a state with a deep history of labor unions, the move led to the recall efforts against him and some state lawmakers — and to a flurry of campaign spending. In 2012, Mr. Walker survived the recall, becoming the nation’s first governor to do so.